Markets were disappointed by the lack of progress in Greece yesterday; albeit they should be used to that by now. It did lead to a big drop in European Bond Yields and equity markets, EUR also underperformed for much of the day. Things weren’t so bad in the US, with equities managing to eke out a small gain after better job information. The commodities remained under pressure, with Iron Ore slipping significantly but Oil recovered some ground. That left AUD lower through the day. There is a lot of talking but not a lot of proposals just yet. Greece turned up to the Finance Minister’s meeting, with the original proposal (of which the referendum said ‘no’) and a good presentation.
They’ve been sent back to do their homework and there are a number of suggestions flying around. These include short term loans, bi-lateral loans, third programs and lots of chatter. While it is looking likely that the ATMs in Greece may soon run dry, and the pressure will rise on the Tsipris Government, the big meeting now appears to be a summit on Sunday (again) with all the 28 leaders of the Euro area. Big confabs have a poor history of reaching agreement is all I shall say. We will hopefully see more in the interim. A proposal is expected on Thursday. Early this morning the EU has told Greece that if they do not reach an agreement by the end of the Summit next Sunday they will be asked to leave the Euro. These comments are certainly weighing on sentiment this morning.
In the US, news was better, with the JOLTS job openings (which the Fed monitors) holding at highs. The Trade Deficit was a little wider, and due to lower exports mostly. That is inevitable with a stronger US Dollar and the ports strike. China’s equity markets continued their decline, but there are a few interesting ‘quirks’ which could either allay your concern, or increase them. Within the decline, there were a number of stocks limit down (ie the trading rules prevent further declines) but a raft of other stocks have been suspended from trading. This is allowed. Reuters reports that more than 200 firms applied to be suspended from trading yesterday, adding to the others who have already done so (~23% of the A share market). This, of course, means that the decline in the index is not reflective of the true position in the equity market, were all stocks allowed to trade.
The Chinese Stock market opened down nearly 8% and is currently trading 4% lower but with over 40% of the Index’s shares now suspended and not trading it is very difficult to get a true reading of the market. Not helping matters is the Emerging Market Currencies in both Asia and South America where a lot of these currencies have broken 10 and 20 year trend-lines against the Dollar. These are the most ugly markets that I have seen since the LTCM debacle in 1998 and the recent stock market crash of 2008.
This morning we have no economic data due from the Euro-Zone or the UK. At 12.00 pm we have the latest US MBA Mortgage Applications. Then at 7.00 pm the Fed will release its Minutes from the June 16/17 FOMC Meeting. Finally at 7.30 pm the Fed’s Williams will speak on the Economic Outlook in Los Angeles.
September S&P 500
What can I say about yesterday’s trading session in what is shaping up to be the most volatile week’s trading since the mini crash last October. When I wrote my commentary yesterday morning I did not expect the S&P to have a trip lower to 2035 before reversing on a dime and trading back to where we started trading yesterday morning at 2076. Shortly after lunch the market dropped to my 2065 buy level before stopping me out of this position at 2058. Subsequently the market made a low at 2035 before thankfully I had said to use my ‘5 Handle Rule’ to go long again which was initiated at 2040 and after a 20 handle surge I was able to cover this position way too early at 2055 and I am now flat. Yet again the S&P had a firm close after testing its 200 day Moving Average for the fifth time already in 2015. This morning the S&P is getting slammed again on the back of the extremely weak Chinese stock Market which is having its own crash coupled with the on-going debacle in Greece who only have until this Sunday’s Summit to save themselves. Given the volatility I have cut my trading size substantially and I will also widen my stops. Today given the large ‘Gap’ down in the S&P I will be a small buyer from 2035/2040 with a 2031 stop which is just below yesterday’s low. If I am taken long and subsequently stopped out of this position I will be a more aggressive buyer on any further dip to 2012/2022 with a 2003 stop. I still do not want to be short the market at this time as my golden rule for the S&P is never to sell weakness.
EUR/USD
Unfortunately I had my stop too tight in the Euro yesterday as shortly after I posted the Euro traded lower to my 1.0965 buy level before stopping me out of this position near the lows of the day at 1.0925 and I am now flat. It is very frustrating to have been stopped out especially when you see the Euro turn around and traded back to 1.1060 before selling off again overnight. To me the price action is very positive for the Euro especially with all the negative news been thrown at it, and yet here we are still trading back over 1.10. Today I will again be a small buyer from 1.0960/1.0990 with a wider 1.0895 stop. Given the price action I do not want to be short the Euro at this time.
September Dollar Index
My Dollar plan worked well yesterday as shortly after I posted the Dollar was trading at my 97.25 sell level before having a nice sell-off which enabled me to cover this position as outlined earlier to my Platinum Members at 96.70 and I am now flat. Today I will again be a small seller on any rally higher to 97.20/97.50 with a tight 97.80 stop.
September DAX
The DAX plan also worked well yesterday as shortly before lunch the DAX traded lower to my 10785 buy level before having a nice spike higher on the US JOLTS data release which enabled me to cover this position at 10840 and I am now flat. The volatility in the DAX so far in 2015 has just been incredible and you have to trade in smaller size with a wider stop. The margin calls from the Clearing Houses everyday must be staggering and to me it is only a matter of time before we hear that some major Bank or Hedge Fund has got cleaned out in this market. As I mentioned last Friday the DAX has major support at 10600 and I would expect that any test of this level initially should lead to a decent rally. For this reason today I will be a small buyer on any further dip to 10580/10630 with a 10530 stop. Given how oversold the DAX is currently trading I do not want to be short the market at this time.
September FTSE
My long 6470 FTSE position did not work out well yesterday but thankfully I had a tight stop at 6440 which was initiated soon after I posted yesterday morning. The FTSE is extremely oversold on a Daily basis and is trading at the bottom of its Bollinger Band. Today I will again try the buy side on any further dip to 6340/6370 with a tight 6315 stop. Given how oversold all these stock markets are I do not want be short any market at this time.
Dow Rolling Contract
Again just like the S&P above what can I say about the price action in the Dow yesterday? When I wrote my commentary early yesterday morning the Dow was trading 100 points higher. Shortly after lunch the Dow fell over 300 points from this high only for the market to turn around and exactly reverse this 300 point decline. Unfortunately after I posted the Dow traded lower to my 10690 buy level before what looked like a great stop at the time at 10630 which was duly filled and I am still flat as I had no level to re-buy the market unlike the S&P above. Maybe I am going to have to pay more respect to the 5 ‘Hindenburg Omen’s on the clock currently and look to set up a short position going forward. This I am reluctant to do this week as we get more and more Greek news to hit the wires. I still believe that Greece will get some sort of deal especially as they owe the German Banks over Eur325bn and the ramifications of a no-deal are just massive for all concerned. Today I will again try the buy side on any further dip to 17370/17440 with a wider 17310 stop.
September BUND
Shortly after I posted the BUND traded higher to my 153.00 sell level and no sooner had I gone short but I was stopped out of this position for a small loss at 153.35 and I am now flat. Then BUND is trading substantially higher this morning as money flows back into the BUND for safe-haven reasons. My only interest in selling the BUND is on a further rally to 154.50/154.80 with a 155.10 stop.
Gold Rolling Contract
My fears that Gold would eventually test the key 1141 double bottom low over the past 12 months is certainly been put to the test at this time. The price action over the past six weeks since we failed repeatedly to break the now key resistance at 1220/1230 has been very negative. Yesterday afternoon Gold eventually traded lower to my 1154 buy level. I am only long in small size and I will leave my stop the same at 1139 which is just below yesterday’s low. Given my concerns for this market if Gold trades back to 1153 I will look to exit this position and stay flat.
Silver Rolling Contract
My long 15.60 Silver position from two weeks ago was finally stopped out at 15.20 and I am now flat. The next key support for Silver is the January spike low at 14.49 and today my only interest in buying Silver is on a dip to 13.90/14.40 with a 13.50 stop.
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